The Estate Tax and The Morality of Making Money
Occasionally, Americans need to be reminded that making lots of money is not immoral. Nor is it immoral to pass it down upon your death to your children.
That time has come again, as the nasty fight debate over the Obama-tax compromise revealed. Sure, arguing about the economic and fiscal consequences of the package is important. It’s impact on social security and the federal debt are only a few of the serious questions raised.
But stoking the fiery opposition to the package was the presumed “immorality” and “obscenity” of accumulating as much money as you honestly can earn. Doesn’t matter how you made it, the public is entitled to a share of it. And the bigger the better.
Same goes for inheritances. Just the concept of “heir”—a person entitled to the property of someone who dies—rankles. When you die, what you have saved for the financial security of your children and your grandchildren’s education must be chewed up and swallowed by the government. It’s no longer your property; everyone in America has a right to take a slice.
In their twisted view of democracy, everyone should start out equally broke. As Rep. Jan Schakowsky (D-Ill.) put it: “It’s just obscene.” She added, somewhat enigmatically: “We’re talking about a handful of Americans that we should have to trade for millions of unemployed people, for millions more middle-income Americans.” I think it means that no one should be allowed to make any money until we’re all neck and neck in the money department.
Syndicated columnist Mark Shields proclaimed on PBS Newshour that the Bush tax cuts are “immoral.” That also was how the lady on one of those TV talk shows called the common American dream of amassing a fortune. (I can’t remember who it was, again proving that watching such shows can impair your thinking.)
Making money, all that you can, is moral. The benefits of earning a living are many. The ripple effects of making lots of money permeate society. And not just in the fact that under our progressive income tax system it generates lots more money for government coffers and the commonweal. (The top five percent pay almost 60 percent of individual income taxes paid.)
While liberals point out the “growing disparity” between the very rich and very poor in America, it should be noted that this is not a zero sum game. Bill Gates’ billions didn’t take money away from those whose incomes are counted in the thousands. In fact, Gates’ wealth created jobs, innovation and not the least, an entrepreneurial climate.
Especially galling for the anti-wealth brigade is inheritances. This year provided a temporary reprieve from estate taxes that had ranged up to 50 percent. That reprieve was to expire at the end of this year if Congress did nothing. Liberals wanted it restored, up to a rate of 55 percent, with a $1 million exemption, or $2 million for couples. Under the terms of the Obama tax package, however, the estate tax will be 35 percent for two years with a $5 million exemption, or $10 million for couples.
That the government would confiscate “only” a third of the estate makes liberals’ eyes spin. Better that the government slice off a half or three-quarters. Or, if liberals could pull it off, 100 percent. In their view, one purpose of the estate tax—in addition to increasing government revenues—is punitive. When you die, it’s punishment for making all that money. It’s the progressive way of getting the last word—not just with the deceased but also with heirs, whose sin was undeservedly reaping this “windfall.” In liberal eyes, an inheritance is as offensive as a royal title being passed to the next generation.
It’s not enough that all this supposed wealth is already taxed, when it is earned as wages or as dividends. You can’t escape the taxman even by giving it away or spending it. Some conservatives call this multiple taxation immoral when it is taxed again as an inheritance.
C’mon, this isn’t a question of morality, on either side. It’s a practical political question amounting to: How can we raise money? And, can we get away with it?
Dennis Byrne is a regular columnist for the Chicago Daily Observer
image Markets and Morality, a Journal which discusses Christian social thought, ethics and economics, and the philosophy, history, and methodology of economics.